Amazon has surprised Wall Street with its second quarter results. Despite the fact that sales were up and Amazon Web Services revenues saw growth, overall Amazon saw a decrease in profits. Mostly because of a significant increase in investments for future growth.
Amazon reported a jump in marketplace sales alongside a slow down in profits, as its expensive ongoing expansion into new shopping categories and countries increases. They posted Q2 revenue of $38 billion, up 25% year on year.
Reuters say: “Yet Seattle-based Amazon posted a 77 percent drop in quarterly income, and even said it could lose up to $400 million in operating profit during the current quarter. Beyond reflecting retail’s notoriously thin margins, the forecast signaled Amazon would invest heavily to maintain its dominance.”
Increased costs have been seen at Amazon as it invests in video content and also the logistics and infrastructure needed for faster shipping. Subscription based income, including Prime fees, rose 51% in Q2 to $2.2 billion. Analysts Cowen & Co are now estimating that more than 50% of USA households will have Prime membership by the end of 2017.
But it seems that the results aren’t a concern to many, even though the share price of Amazon has taken a hit. Edward Jones at Olson says: “The fact that they are investing on so many fronts right now just speaks to the opportunity that they have before them. We are giving them the benefit of doubt here because they have executed so well historically.”
Revenues from Amazon Web Services, a significant profit centre, and the biggest cloud-computing business in the world, rose 42% to $4.1 billion. The division will also expand in France, Sweden and China in the near future, Amazon says.
Jeff Bezos was briefly the richest man in the world yesterday. But this has put a minor dampener on his personal wealth. But Amazon continues to grow and invest in its many horizons so some soggy quarterly results are no reflection of the general and epic trajectory the company is on.